It's against federal law to make a machine gun. In Tennessee, as long as he doesn't break any federal laws, he can do whatever he wants without the federal license, but he cannot he doesn't sell what he produces. If he keeps it personally, he isn't even required to put a serial number on the receiver. If he wants to sell it at a later time, however, he's required put a serial on it, and he also may invoke the wrath of the ATF. It's said that you can sell a reasonable number of homemade firearms per year without requiring the manufacturer's license, but I believe that reasonable number is arbitrarily set by the ATF agents.
Disclaimer: I've never made my own firearm, and if I did, I certainly wouldn't sell it; between the risk of federal prison and liability if it blows up, if I had to get rid of the thing, it would be destroyed.